Thursday, January 31, 2008

Yesterday we reported that Tesco's Fresh & Easy Neighborhood Market formally announced (in our case confirmed, since we've been reporting on the issue for some time) it has 18 locations, with signed leases, in the San Francisco Bay Area for its Fresh & Easy small-format, convenience-style grocery stores. (Click here to read our piece.)

The San Francisco Chronicle has a story in today's paper on the Fresh & Easy announcement. Although it doesn't provide any new information in terms of the facts, we wanted to share the Chronicle story with our readers, as it has a nice local flavor to it, as well as offering-up an interesting discussion.

Additionally, you can view a picture of the site (click here) in San Francisco's Bayview-Hunters Point neighborhood where the Fresh & Easy store, which will be located at 3rd Street & Carroll Avenue, is being built. The Fresh & Easy will be the ground-floor retail anchor of a mixed-use residential development in the lower-income neighborhood which has long been neglected by food retailers.

Wednesday, January 30, 2008

Fresh & Easy has just announced (or in our case confirmed) it will open 18 stores in the San Francisco Bay Area.

Eleven of the 18 stores will be in the East Bay Area. Two stores will be opened in the cities of Antioch and Hayward respectively. Additionally, Fresh & Easy announced/confirmed that stores (1 store in each city thus far) will be opened in the Easy Bay cities of Oakland, Concord, Walnut Creek, Danville, Oakley, Vallejo and Fairfield.

Further, the company said seven additional stores will be opened in the following Bay Area cities: Two stores in San Francisco, two stores in San Jose, and one store each in Mountain View, Sunnyvale and Napa. Mountain View and Sunnyvale are located just a few miles from San Jose, in the famed Silicon Valley region. Napa is located about 30 miles north of San Francisco, in the famous California wine country.

As our readers know, we reported on Fresh & Easy Neighborhood Market's Northern California plans and strategy in our piece, "Fresh & Easy Locking-Up Leases for Northern California Invasion," last Thursday, January 24. (Read that piece here.) In that piece we said we could confirm that Fresh & Easy had already locked-up leases on stores in San Francisco, Oakland, San Jose, Concord and Fairfield. We also mentioned the other store locations Fresh & Easy announced and confirmed today.

On Monday, January 28, we also reported that Fresh & Easy will open four stores in the Sacramento region; two in Sacramento and two in nearby Folsom. (Read that piece here.) The retailer has filed liquor license applications with the state of California for these four stores. Fresh & Easy won't confirm the Sacramento stores, however, pending the issuing of the licenses.

The 18 grocery markets Fresh & Easy has formally announced will open is just the tip of the iceberg however. As we reported in our January 24 piece, more stores are to come. In addition to the four stores we reported will be opened in Sacramento and Folsom, Fresh & Easy also is looking for store sites in the nearby Sacramento metropolitan cities of Davis, Rancho Cordova, Woodland and a couple others.

Further, Fresh & Easy will build a distribution in Stockton, California, which is about 30 miles from Sacramento. It's also looking at store sites in Stockton, a city of about 330,000, and nearby Modesto, which has about 205,000 residents. The nearby cities of Tracy and Manteca also are on Fresh & Easy's real estate radar, although they are less of a priority, according to our sources.

The Bay Area is the primary target market in Northern California however for Fresh & Easy. In addition to the 18 announced or confirmed store locations, the retailer plans on more stores in the nine-county region of nearly seven million people. We will keep you informed as further developments, which we are working on, come to light.

We also discussed locations where Fresh & Easy representatives are negotiating for leases but haven't signed any to date, as far as we know. One of those Northern California cities we mentioned in the piece where Fresh & Easy representatives were looking hard to secure store locations is the capital city ofSacramento, and the surrounding metropolitan region.

We can report today that Tesco's Fresh & Easy Neighborhood Market has applied with the state of California for liquor licenses for Fresh & Easy markets at four store locations in Sacramento. Two of the stores are in the city of Sacramento, the other two are in the nearby suburb of Folsom, which is right next to Sacramento.

The city of Sacramento locations named in the company's liquor license applications with the state are:

3311 Northgate Blvd.

3615 Bradshaw Road.

The Folsom store locations are:

25000 Blue Ravine Road.

9522 Greenback Lane.

This brings to nine the number of signed leases for stores to date we can confirm in Northern California. In addition to these four new locations in Sacramento, the other five stores are in the Bay Area: one store is in San Francisco, one in Oakland, one store in San Jose, one in Concord, and one store in Farfield.

Fresh & Easy is negotiating for additional store locations in San Francisco, Oakland and San Jose, and in dozens of other smaller cities nearby. Read our January 24 piece for more detail.

Analysis: The Sacramento metropolitan region food retailing market

Sacramento, which is located in the northern central valley of California, is about 90 minutes from San Francisco and the central city of a metropolitan region consisting of about 2.2 million people. The city of Sacramento's population is close to 500,000.

In terms of the food retailing market, local chain Raley's Superstores is the number one food dollar market share leader in the region. Raley's operates large Superstores under the Raley's banner, smaller but upscale stores under the Bel-Air name, and a few stores under the Nob Hill Foods banner in the region. Raley's, which operates stores primarily in Northern and Central California, and Nevada, has its corporate headquarters in nearby West Sacramento.

Raley's, Bel-Air and Nob Hill stores offer a full selection of basic grocery items. They also sell an extensive selection of specialty and natural/organic foods. Most of the grocer's Superstores, which average from 60,000 -to- 80,000 square feet, have large natural and organic foods store-within-a-store departments in them. In fact, Raley's is one of the pioneer's nationally in natural and organic product merchandising in the supermarket format in the U.S. A number of the Bel-Air and Nob Hill banner stores are smaller, ranging from about 35,000 -to- 45,000 square feet.

Safeway Stores also has a number of supermarkets in the Sacramento metropolitan region, as does Modesto, California-based Save Mart, which bought Albertsons' Northern California Division (over 200 stores) last year. Prior to acquiring the Albertsons' stores, Save Mart, who's corporate headquarters is located only 60 miles away in Modesto, didn't have any stores in Sacramento. With the Albertsons' acquisition, Save Mart doubled its size, and now operates nearly 300 stores in Northern California. It's the number two market share leader in the entire region, behind Bay Area-based Safeway Stores, Inc.

Trader Joe's also has a few stores in the Sacramento metropolitan region. TJ's is super-popular with area shoppers. Cost-Plus World Market, which is a national chain that's headquartered in nearby Oakland, has large specialty foods and beverage departments in its stores, and is very popular among area consumers. Costco Wholesale, it's stores packed with prepared, specialty and natural and organic foods in addition to everyday grocery staples and more, is wildly-popular in the region as well.

There also are numerous big box grocers in the region" Food Maxx, a division of Save Mart, Food-4-Less, a couple Wal-Mart Supercenters and a couple other independent warehouse-style stores, all do battle for the low-price customer in the area. Whole Foods Market, Inc. also has a large store in Sacramento. Further, there are numerous local, upscale multi-store and single-store independents in the region. Most prominent is Nugget Markets, which has about 10 stores in the region. Its stores are full-line, upscale grocery stores which offer lots of specialty, natural, organic and fresh prepared foods.

Fresh & Easy will find a competitive market in the Sacramento region; especially hometown grocer Raley's, which is one of the region's biggest supporters and boosters. Many people consider Raley's as "corporate citizen numer one" in Sacramento.

However, the region is a big automobile commuting area, and the small-format, convenient Fresh & Easy stores could prove popular with shoppers looking for an easier shopping experience than the big box and Superstores that tend to dominate Sacramento and the surrounding area.

However, there's also plenty of upscale competition (along with price-store competition), including Raley's, Bel-Air, Nob Hill, Whole Foods, Trader Joe's, Nugget Markets, World market and independents like the popular Corti Bros., Sacramento's first and longest-open upscale specialty grocery store.

With its basic grocery, low price focus, combined with its prepared and specialty foods semi-upscale focus, Fresh & Easy will need to convince Sacramento area shoppers it offers something they aren't currently getting from their numerous, mostly local-based, food retailers.

Although the region has over 2 million people, it's still "hometown" oriented. For example, even though Safeway Stores is headquartered less than 100 miles away in the Bay Area city of Pleasanton, its never been able to seriously compete with local grocer Raley's, do primarily to the fact that Sacramento-area shoppers are very hometown-guy loyal. To be successful in Sacramento, Fresh & Easy will not only have to execute well at retail, it also will have to get heavily involved in the community and show area residents it's not merely a "foreign" invader.

There are differences however between Tesco Express and Fresh & Easy. The main two differences are in the areas of basic grocery selection and pricing, and prepared foods offerings. Fresh & Easy sells a slightly more extensive line of everyday grocery products than Tesco Express stores do, and puts more of a focus on lower pricing of those basic grocery items than does Tesco Express.

Second, Fresh & Easy offers a more extensive line of prepared foods than Tesco Express stores do. However, the similarities between the two Tesco, small-format, convenience-oriented stores far exceed their differences.

The Tesco Express format has been extremely successful in the UK; so much so that the company has extended the format throughout parts of Eastern and Western Europe.

Now, according to today's Financial Times, Tesco is taking its Tesco Express format to China, the world's most populated country. The British retailer already has 50 of its hypermarkets--huge stores that carry everything from groceries to electronics, clothing and much more--located throughout China. The British retailer plans on building more hypermarkets in the country, but also wants to tap into the growing desire for more convenience-oriented shopping among China's growing middle class.

Tesco, the third largest retailer in the world, number one global retailer Wal-Mart, and French retailer Carrefour, number two in the world, are locked in a major competitive battle in China. Wal-Mart currently has 100 hypermarkets which it owns completely in China, and owns 35% of 102 Trust-Mart stores, a local Chinese chain. Carrefour has 100 hypermarkets in the fast-growing country, along with owning 300 "hard discount" stores under the Dia name.

The move into the smaller Tesco Express stores in China will allow Tesco to better compete with Wal-Mart and Carrefour overall, as the smaller stores take less time to build than hypermarkets and can be located in much smaller locations, such as in urban areas.

Further, by adding the Tesco Express stores to the mix in China, it will give the retailer a multi-format strategy rather than a single format one, which currently exists with just having hypermarkets in the country.

Since November, 2007 when the store opened, 33 people (to date) have reviewed the Fresh & Easy Neighborhood Market store on Eagle Rock Blvd. in the city of Los Angeles, California on the review website Yelp.

The 33 reviews range from very positive, to rather negative, and a few in between. They also range from long treatises, to reviews consisting of short and pithy sentences. (The store is located at 4211 Eagle Rock Blvd., Los Angeles, California, 90065.)

Based on our sources and on reader comments, the Eagle Rock store has been on of the busiest and most popular Fresh & Easy grocery markets to date. There currently are 33 Fresh & Easy grocery markets in Southern California, Arizona and Nevada.

Friday, January 25, 2008

Although the new Fresh & Easy Neighborhood Market store in the city of San Jacinto, in Southern California's desert region, actually opened for business last week, the store had its official grand opening yesterday, on Thursday, January 24.

The store is the second Fresh & Easy location in the San Jacinto Valley, which is part of the sprawling and fast-growing Southern California desert region. The other valley store, in the city of Hemet, was actually the very first Fresh & Easy market to open in late October, 2007. That store was scheduled to be one of the first to officially open on November 5, 2007, but actually had a "stealth" soft-opening two weeks earlier, making it the very first Fresh & Easy store of the chain to open its doors for business.

Today's Valley Chronicle, a local newspaper in the region, has a story on the new San Jacinto store's grand opening today. You can read that story here.

Tesco, parent company of Fresh & Easy Neighborhood Markets, plans to eventually open 44 stores in the vast Southern California desert region of which the San Jacinto Valley is a part of, making the area a major target market for the convenience-oriented, hybrid basic grocery and prepared/specialty foods' format stores.

A new 14,000 square foot Fresh & Easy Neighborhood Market store opened yesterday in the Southern California city of Fallbrook, which is located in San Diego County in the southern most part of the Golden State.

The Fallbrook store's grand opening was a bit more subdued than the one the day before for Fresh & Easy's new store on Hollywood Blvd., in Hollywood, California. (Read our piece from Wednesday on the Hollywood store grand opening here.)

It was however a grand, grand opening none-the-less. Several Fresh & Easy Neighborhood Market executives joined the store's manager, store associates and local city VIP's to cut a ribbon and officially open the newest grocery store in this city of about 35,000.

And although it isn't Hollywood, the city has its own claim to fame: The area around the city is known for its avocado groves and avocado farming industry. And in celebration of that, the city of Fallbrook has proclaimed itself the "Avocado Capital of the World." Each spring the city holds its Avocado Festival, which draws thousands of people from miles around to the city to celebrate the local avocado bounty.

The Fallbrook store is the 34th Fresh & Easy grocery market to open since November 5, 2007, when the first stores opened in Southern California. Fresh & Easy, which is owned by British mega-retailer Tesco, currently operates stores in Southern California, Arizona and Nevada. The grocer plans to enter Northern California later this year with its small-format stores, which combine basic groceries at a low price, with fresh, prepared and specialty foods items. (Read our story from yesterday about Fresh & Easy's Northern California plans here.)

There were a couple hundred local residents at the Fallbrook Fresh & Easy store grand opening yesterday. Most of the them rushed into the store when the doors were open for the first time. The Fresh & Easy is in a former Do-It Center home improvement store building which had been vacant for some time until Fresh & Easy remodeled it to fit its format.

Local members of the Fallbrook Chamber of Commerce expressed much pleasure with the fact that the grocer took an empty retail building and turned it into a food store. Fallbrook Chamber director Bob Leonard said he believed the new Fresh & Easy would help to stimulate the local economy by keeping shoppers who drive out of town for prepared, organic and specialty foods in town, shopping at the market.

As part of the grand opening celebration, Fresh & Easy gave a $1,000 donation to the Angel's Society, a local charity. The grocer makes a $1,000 donation to a local non-profit group chosen by store associates each time it opens a new store.

Leonard of the Chamber of Commerce said that although the city has a number of large supermarkets, including an Albertsons and two good-sized popular independents, he thinks Fresh & Easy will do well in the community, especially with the store's selection of prepared, natural, organic and specialty foods and groceries, which he added aren't available in the other local supermarkets to a large degree.

In closing, we would expect the Fallbrook Fresh & Easy store to make sure it has a very large fresh avocado display in its produce department come harvest season, not to mention making sure it sells every type of grocery product it can find with avocados as part of its ingredients: avocado chip dips, oils, salad dressings, breads, and on and on. After all, the store is located in the "Avocado Capital of the World."

Thursday, January 24, 2008

Tesco chief executive officer Sir Terry Leahy (pictured left) on Monday told Britain's Jeff Randall, host of the popular Jeff Randall Show on Sky TV, that 2008 is going to be a tough year all around for retailers, including grocers.

Sir Terry told Randall that shoppers are spending less because fears over the economy are convincing them to tighten their purse strings and belts. "Consumer confidence is way down," the Tesco boss added.

Sir Terry said value is key at present. "People are looking for value, and are probably changing the things they're spending on," he said.

On January 7 we wrote about Tesco's latest new retail food store format development, a small-format, no-frills, discount grocery store for its home market in the United Kingdom (UK). (You can read that piece here.) Tesco is currently developing the price-impact, small-format stores in an old warehouse in Britain owned by the chain's founder

Every the busy format innovator, Tesco also is in development of yet another new format: a multi-level town centre (urban-style) department store that would sell food and groceries, consumer electronics, housewares, clothing, jewelry, toys and other non-foods items. The stores would be two-to-three stories in size, with escalators linking the floors, according to a report by the Financial Times. The original source of the information came from a Tesco report on the new store format which was leaked to and published in the British trade publication Property Week.

Tesco already operates large, full-service mass merchandising or hypermart-type stores. However, that store format is too big for most urban locations. The new Tesco department store-style shops would be about 60,000 square feet. The stores would offer fresh foods and grocery products side-by-side with the assortment of non-foods goods mentioned above.

According to the internal paper on the format, Tesco will target Mark's & Spencer, Debenhams, BHS and a couple others who already operate similar format stores.

Many UK retail industry observers are wondering however if Tesco might be going too far. Between all the Tesco supermarkets, hypermarkets, Tesco Extra and Tesco Express format stores--and now the new no-frills, small-format grocery markets in development, and the new department store-style format--the retailer has been opening over the last five years or so, they say what they call "Tesco fatigue" might be setting in with consumers. These observers site the fact that British supermarket chain Wm Morrison beat Tesco considerably in fourth quarter holiday season sales as an example of that possible "Tesco fatigue" on the part of shoppers.

However, other observers say if Tesco does enter this segment of the retail market they will exert serious competitive pressure on its current players. they especially say Tesco will be a major player on London's High Street, where many of the top department store-style format stores are located, including Marks & Spencer's top-grossing store of that format.

Fresh Foods industry veteran Jim Prevor, who publishes the Perishable Pundit online publication, says in a piece posted yesterday that his "intelligence network" of buyers, sellers, vendors and other industry folks tell him they're seeing way too few customers in Fresh & Easy stores when they are in them. Further, Prevor says various product suppliers are telling him that orders from Fresh & Easy are way below expectations. Fresh and Easy currently has 33 grocery markets open in Southern California, Arizona and Nevada as of today.

We--and our own intelligence network which is growing every day--tend to agree with the observations the Perishable Pundit is hearing. Industry sources and vendors have told us they are doing good business in some Fresh & Easy stores, but doing very little in many others.

We also get regular updates from numerous Fresh & Easy shoppers. Thus far, one common theme we've heard from them is that nearly every time they go in their local Fresh & Easy, it's near-empty. One exception--and we hear this often--is the Fresh & Easy in the city of Los Angeles. Based on the reports we've recieved, it sounds like the store is humming along well, and full of shoppers. We're sure there are other stores doing similar brisk business, but based on our reader and source feedback, observation, and Prevor's network, we aren't hearing much about those stores if they do indeed exist.

Prevor isn't writing-off Fresh & Easy by any means in his piece. Nor are we. It's still very early--the first store has only been open since early November, 2007. However, he suggests--and we concur in large part--that there will need to be some format and merchandising tweaks and changes to the stores by Tesco in the near future.

We recently has a conversation with a Fresh & Easy store manager who told us he has expressed those same views to corporate executives. He said they were very receptive to his comments. One of those comments he shared with us was that he told a corporate executive that the company needs to localize its stores much more. We agree with that completely--and think Fresh & Easy is beginning to figure that out.

As we've reported before, Tesco's Fresh & Easy Neighborhood Market plans on entering Northern California in a big way, beginning later this year--and really making a big splash in the region in 2009. Currently, the grocer has stores in Southern California, Arizona and the Las Vegas, Nevada metropolitan area.

Here's what we know about the Fresh & Easy Northern California invasion plan to date:

>Tesco has confirmed only one location in Northern California thus far. That site is in the Bayview-Hunters' Point neighborhood in San Francisco. The neighborhood is a low-to-moderate income one, and has a majority African American population, although that is changing rapidly as younger generations of African Americans move out of the city to the outlying regions where homes are more affordable.

Fresh & Easy store executives held a ribbon cutting ceremony at the Bayview-Hunters' Point location late last year, along with San Francisco mayor Gavin Newsom, and members of a neighborhood group who've been trying to get a grocery store that sells fresh foods in the neighborhood for at least a decade. Tesco has signed a lease for the site. The store will be the retail anchor of a brand new mixed-use, primarily residential condo and apartment development on Third Street in the neighborhood. Additionally, A San Francisco city official and a commercial real estate agent told us they know of at least two other sights in the city of nearly 800,000 that Tesco Fresh & Easy representatives are currently negotiating for.

>Tesco has signed a lease for a location in the city of San Jose, the largest city in the Bay Area with nearly one million residents. The Fresh & Easy store will be on Bird Avenue in a former Albertsons supermarket. Tesco will remodel the empty supermarket building to fit its Fresh & Easy format. Further, our commercial real estate source, and a San Jose city government sources, tell us Fresh & Easy is looking at as many as 3-4 more locations in the city for its combination basic grocery/fresh, prepared foods grocery markets.

>Tesco has signed a lease for a store in Fairfield, California. The Bay Area city is located about 40 miles from San Francisco on the freeway route to Sacramento. Fairfield is about 70 miles from Sacramento.

>Tesco is looking to make the east Bay Area city of Oakland its retail beachead in the Bay Area. The grocer has already locked-up a lease for at least one store site, and is in the process of negotiating for another. Additionally, a commercial real estate source told us he has talked with Tesco about 2-3 other potential locations in Oakland for Fresh & Easy stores. A local Oakland city government official also said at a recent Bay Area economic forum that Fresh & Easy has told her that they want to locate as many as five stores in the City, which is located just over the Bay Bridge from San Francisco.

>Tesco has signed a lease in Concord's Clayton Valley Shopping Center, where it plans to open a Fresh & Easy grocery market in 2009. The leased building in the center is about 14,000 square feet. Concord is in the east Bay Area, about 15 miles from Oakland.

The above locations are all in the Bay Area, and are what we have confirmed as "done deals" for Fresh & Easy stores to date.

Tesco is negotiating over numerous other sights throughout the Bay Area however. According to our commercial real estate and city and county government sources, the grocer is looking in the east Bay Area cities of Hayward, Walnut Creek, Antioch, Oakely, Pittsburg, Pleasanton, Dublin and Livermore, (in addition to Concord and Oakland), where it plans on having one or more stores per-city.

Further, in addition to San Jose, the grocer also is discussing locations in the south Bay Area cities of Fremont, Redwood City, Menlo Park, San Mateo and Burlingame.

Basically, Fresh & Easy is using a similar "ring the bay" strategy for its upcoming Bay Area launch as it currently is using in Southern California. That strategy is to locate stores all over the region, creating a critical mass of the small grocery stores throughout cities and neighborhoods. We refer to this as a "Starbucks" or "Walgreens" strategy. The coffee retailer and drug store chain have used this "critical mass" retail strategy to much success in California and elsewhere.

In addition to the nine-country San Francisco Bay Area, which has a population of about 7 million people, Tesco also is negotiating with commercial real estate people for Fresh & Easy store sites in the Sacramento metropolitan region, which currently has a population of about 3 million. This includes stores in Sacramento itself, and in the nearby suburbs of Woodland and Davis, as well as others.

Tesco also plans to locate a small distribution center in the central valley city of Stockton, which is about 45 miles from Sacramento. Stockton also is about an hours drive from San Francisco. The distribution center would service Fresh & Easy stores in the Bay Area and throughout Northern and Central California.

In addition to locating the distribution center in Stockton, our sources tell us Fresh & Easy representatives are looking for store locations in the city of Stockton, and in the nearby cities of Tracy, Lathrop, Manteca and Modesto. The region from Stockton and Tracy to Modesto, has over 1 million residents.

Tesco's number-one priority in Northern California clearly is the San Francisco Bay Area. Second is the Sacramento region, and third is the rest of Northern and central California.

Based on discussions with commercial real estate people, government officials and other sources, we think Tesco plans on opening about 30-50 Fresh & Easy stores in Northern California by the end of 2009.

Wednesday, January 23, 2008

There were Marilyn Monroe and Paris Hilton look-a-likes strutting their stuff on a red carpet today on Hollywood Blvd., in Hollywood, California. There were men dressed in black tales and white tie, and numerous women looking elegant in designer dresses and high heels. A band played music, people danced, others sipped champagne.

No, it wasn't an early start to the famous Hollywood Academy of Awards celebration. Rather, it was a Hollywood style grand-opening for the newest Fresh & Easy Neighborhood Market store. The new market is located at the intersection of Hollywood Blvd. and Sycamore, Hollywood's famous "Street of Dreams."

In typical Hollywood style, Fresh & Easy CEO Tim Mason officially opened the grocery market by placing his hands in wet cement in front of the store, and cutting a ribbon made of movie filmstrip, the Hollywood version of a ribbon-cutting ceremony. Once completed, the store's doors were open for the numerous shoppers and just curious to go inside and see what Fresh & Easy is all about. Hollywood-style of course.

The newest Fresh & Easy, the grocer's 33rd store to open to date in Southern California, Arizona and Nevada, is located right across the street from the famous Hollywood Roosevelt Hotel. Just steps away from the store's entrance are the famous "Hollywood Stars," those iconic sidewalk stars with the names of thousands of celebrity's emblazoned on them. Nearby, on what has been called "The Street of Dreams" is Mann's Chinese Theatre, a historic Hollywood landmark. And, also nearby is the newer Kodak Theatre,where the Academy Awards, Emmy Awards, and other showbiz events are regularly held.

Tesco's Fresh & Easy Neighborhood Market is now part of this "Street of Dreams," where famous and infamous actors and others once waited tables at its restaurants, or tended bar or served cocktails at night while auditioning for movie roles during the day. Hollywood Blvd. also has seen its share of shattered dreams. It's streets are still filled with runaway teenagers, former hippies, drug users and prostitutes who've lost their American dream; at least for now.

Tesco's Fresh & Easy grocery market however is part of a new urbanism that's happening on Hollywood Blvd. Over the past five years or so the "Street of Dreams" has become more residential, with new condos and apartments being build in the neighborhood. Lots of retail stores have been added, making it a popular shopping venue for those who live nearby and not so nearby.

The neighborhood also has become a prime night spot. Just like those who were at the Fresh & Easy store grand opening today saw a Paris Hilton look-a-like, if you are out-and-about on Hollywood Blvd. on any given evening, you're likely to see the real Paris, along with a host of other celebrities, eating sushi, Italian food or other cuisine at one of the neighborhood's many new, upscale eateries. There's also new bars, cafes and nightclubs, all filled nearly every night.

The neighborhood should be a good one for the Fresh & Easy market. There aren't many food stores nearby, so the store should sell lots of basic grocery items. Additionally, the growing residential population in the neighborhood is young and primarily professional, which is a good target market for Fresh & Easy's prepared foods offerings.

In many ways, locating a store on Hollywood Blvd.--the "Street of Dreams"--is symbolic for Tesco's Fresh & Easy venture. Like the millions of people from all over the world who have come to Hollywood to become a success in show business, the British Tesco is hoping to achieve it's American dream with it's Fresh & Easy convenience-oriented grocery stores in the western U.S. And like Frank Sinatra crooned in his famous song..."(On) The Street of Dreams," Hollywood Blvd. is as good a place as any to try to achieve that success.

As part of its grand-opening celebration today, Fresh & Easy made a cash donation to the Children's Hospital of Los Angeles. The hospital was chosen by the store's employees to receive the donation. Fresh & Easy makes a cash donation to a local non-profit group or other organization each time it opens a new store.

"Opening in such an iconic neighborhood is exciting," said CEO Mason in summing up the day. "Everybody wants fresh, wholesome food at affordable prices and we think Fresh & Easy will be a great addition to the neighborhood."

Tuesday, January 22, 2008

When we wrote our piece here (seebelow) yesterday about the state of the Fresh & Easy corporate blog, the post currently dated Sunday, January 20, 2008 was dated December 14, 2007, along with the piece currently under that date on the blog. (Click here to view the F&E blog

We checked the F&E corporate blog four times yesterday: just seconds before we started writing our story, once we finished writing our story, right before we posted it, and about three hours later on Monday evening. All four times the current post dated January 20 was dated December 14, 2007.

Sounds like Gremlins in the system, date changers (similar to shape shifters we're told) or something similar we suspect. A bit mysterious though.

In any event, we're just glad to see a new post on the blog. We harbor no illusions we had anything to do with the date change. Great pictures of the prepared foods items in the blog post as well!

Now, it would be nice if someone at the blog would answer those three reader questions in the comments box on the December 14, 2007 post. One reader actually has offered his answer to one of the questions. All three are good questions, and it would be nice to read F&E's answers to them.

Monday, January 21, 2008

Tesco's Fresh & Easy Neighborhood Market marketing chief Simon Uwins created a blog on the Fresh & Easy website prior to the grocer's opening its first stores in the Western U.S. The retailer used it to announce their first store openings as well, along with posting other news since then.

We thought (and still do) doing so was a great idea. Corporate blogs can in many ways not only be a great communication device for retailers to reach a wider audience They also can be sort of a digital extension of the retail storefront in terms of marketing, media relations, customer and employee communications.

However, just like retail storefronts that get neglected--which leads to all sorts of negative results--corporate blogs that get neglected can actually result in being a negative aspect of a retailer's business, rather than a positive one, which we feel they are when kept current and up to-date.

Such we feel is the current state of affairs on the Fresh & Easy corporate blog. The last posting on the blog--which we enjoyed--was on December 14, 2007, a full five weeks ago. Additionally, in the comments section of that post are four comments, three of which are questions to the blogger. None of the three questions have been answered by Mr. Uwins or members of his marketing staff.

It's not like nothing has happened since December 14, 2007. How about the Christmas and New Year's holiday's for starters: They're generally the two biggest shopping days of the year for grocery retailers. There must be at least one or two bits of news from the holiday season at the stores that Fresh & Easy could share with the world.

A few other things have happened since December 14, 2007 as well. For example: Many more Fresh & Easy stores have opened, Tesco had a ribbon-cutting ceremony at a San Francisco location that will be it's first confirmed Fresh & Easy store in Northern California, and Wal-Mart has decided to get into the small-format grocery business in Arizona and compete against Fresh & Easy. Those happenings are just for starters on the Fresh & Easy news front.

As we said in our opening paragraph, it's our belief the Fresh & Easy corporate blog is a great idea. However, when the bloggers don't respond to reader questions in the comment box, it suggests to us that the team isn't customer-service oriented. That's a bad reflection on store level associates who are striving to serve shoppers.

Additionally, when the blog goes without an update for five weeks, it makes us wonder what is up at Fresh & Easy HQ? We know the folks there must be super-busy. But how long does it take to write a little update on the blog at least once a week? Not long, is the answer to that question.

What we'd like to see happen over at the F&E blog:

>Update the blog with something new at least once a week.

>Post comments to the blog in a timely manner. We know for a fact that some comments aren't posted to the blog for weeks. The bloggers moderate the blog, which means comments don't go immediatly to it. That's fine, we do it ourselves for security reasons. We also make sure to post the comments within a day or two, three at the most. It's just common curtesy to do so; if a reader takes the time to read what you write, and to write a comment or ask a question, the least a blogger can do is post (or delete if it is offensive) those comments in a timely manner.

>Either answer comment questions or post a "no comment." This is customer service 101. Remember, your blog is an extension of your stores.

We're looking forward to seeing a brand new post on the Fresh & Easy corporate blog soon. We know there's lots of great stuff the marketing staff can share with the blog's readers. Also, we're looking forward to seeing the reader comment questions answered soon as well.

The blog is a great idea, as we said above. We support it. However, great initial ideas that aren't followed-up on and nurtured can become bad ones in no time flat.

But just like the grocery store that went neglected, and soon lost most of its customers do to its lack of attention, a corporate blog can be a positive force for a business, or a negative one.

Communication is a multi-channel phenomenon. When one of the two channels--the reader in this case--isn't being responded to, they stop reading the blog. It isn't hard to assume they also aren't likely to shop in that retail blogger's stores either--nor suggest the retailer to his or her friends and family.

An Arizona blogger who calls herself a "Dinosaur Mom" talks about a Tesco Fresh & Easy Neighborhood Market store coming into her town, along with discussing her views on Wal-Mart's Supercenters, and other shopping priorities in the life of a consumer, shopper, mom and blogger.

She calls her blog "Astrodon Johnstoni," which is the Maryland state dinosaur. She lived in Maryland for many years before moving to Arizona. Bet you didn't even know states had state dinosaur's? For our British friends who think that a bit odd, keep in mind that people in the states think it's a bit strange to name a "royal" grocery store. By the way--is it Tesco, Sainsbury's or Waitrose that's the "royal" chain in Britain these days?

Read the "Dinosaur Mom's" thoughts and words about Fresh & Easy and the other grocers in her community here.

PS: Retailer's hate seeing the name of their chain and the word dinosaur in the same sentence. After all, becoming a retail dinosaur is not high on the wish list of any grocer.

Friday, January 18, 2008

Tesco plc., parent company of Fresh & Easy Neighborhood Market, had mixed corporate sales for the holiday 2007 season period.

The retailer saw its stock share price drop heavily earlier this week on the news. Sales in its core United Kingdom (UK) market, which makes up about 75% of Tesco's retail sales, missed market analyst expectations. Its poor showing in the UK was due in large part to an exceptional showing by UK food retailer Morrisons, one of Tesco's chef competitors.

Tesco's sales abroad were much better though, and continue to surge due in large part to numerous new store openings in Europe, Eastern Europe, the USA and elsewhere.

The British retailer also said the initial response by consumers in the Western U.S. to its Fresh & Easy Neighborhood Market stores has been "very encouraging." The retailer currently has 29 of the small-format, convenience-oriented grocery markets in California, Arizona and Nevada. Tesco hopes to have as many as 200 stores open in these markets by the end of 2008.

Read a complete analysis of Tesco's holiday season sales and earnings here.

In a bid to be a more environmentally-conscious grocer, and save money on energy expenses to boot, Tesco is using a product called Door Misers cooler shades on all of its open refrigeration cases in it's 29 Fresh & Easy stores in California, Arizona and Nevada.

The cooler shades are from Phoenix, Arizona-based Supermarket Energy Technologies, according to a story in Wednesday's Arizona Republic.

As pictured above, the cooler shades go over the front of the case. They keep the cool air from getting out of the refrigeration case, both when the store is open and when it's closed at night.

Grocers believe open refrigeration cases tend to spur more impulse sales from shoppers, but they also use much more energy than closed door units. The refrigeration case shades are designed to decrease the amount of energy used, while still allowing easy-access by shoppers to the products on the refrigeration case shelves. (Read the full story here.)

Picture: Arizona Republic. Dan Bunch, president of the company that makes the cooler shades, poses with the shaded refrigeration cases in a Fresh & Easy store in the Poenix, Arizona region.

Fresh & Easy is running some good ads in its store advertising circular. The grocer offers a mix of basic, everyday grocery items, along with prepared foods and other goodies in the advertising circular. We thought we would give you a look at the circular below.

A question for our readers: Are any of you getting the Fresh & Easy Neighborhood Market retail advertising circular? If you are, please let us know what you think about it, either in our comments box at the end of this post, or via email. If you email us your comments, just tell us in the email if you don't want your named used--we won't use it. And of course, if you choose, you can post anon in the comments box. Our email address: freshneasybuzz@yahoo.com.

Bob Pratte, a columnist for the Riverside Press-Enterprise newspaper in Riverside County, California, says for him the "thrill is gone" from his strictly shopping at a local Fresh & Easy market for the last month. Read what Pratt has to say here

The blog Natural~Specialty Foods Memo has a piece in which the writer analyzes Wal-Mart Inc.'s plans to open its new MarketSide small-format grocery stores in Arizona later this year, Safeway Stores' plans to open similar small-format stores in Northern California, and how this new competition will affect Tesco's Fresh & Easy stores in both Arizona and California.

It's a good analysis, and we suggest reading it as a way to get a good lay of the land on what the blog calls the small-format food retailing revolution currently going on in the U.S. (read the story here.)

Additionally, the website retailwire has a discussion here about a similar topic, but with a primary focus on Wal-Mart's new MarketSide small-format stores, and a secondary focus on the competitive aspects of Wal-Mart vs. Tesco's Fresh & Easy.

The writer of the desertbest.com website, a site covering goings on of all kinds in the Southern California desert communities, likes the Fresh & Easy format of basic groceries at low prices, combined with fresh, prepared foods and specialty items like fresh flowers, wines and more.

The writer especially likes the store at 42nd and Jackson Street in the desert town of Indio, California.

Read what desertbest.com thinks about the Indio store, the Fresh & Easy format, and other things here.

Fresh & Easy Neighborhood Markets has signed a 20-year, $10 million dollar lease for 30,678 square feet of retail space in the former WOW building at 4,580 Sahara Avenue in Sin City, according to a report (which we verified) in the Las Vegas Business Press, a local publication that covers the commercial real estate industry in the region. The reported average rent in the building is about $1.35 per square foot.

The new store location is nearby the famous Las Vegas strip. Since the total square footage Fresh & Easy leased is 30,678 square feet, and the Fresh & Easy store format averages 13,000 to 15,000 square feet, we think the retailer will sublease the remaining square footage to another retailer.

To date, Fresh & Easy has five grocery markets in Nevada. All are located in the Las Vegas metropolitan area, which is the grocer's primary target market in the state.

Jon from the Metroblogging Orange County blog and his wife recently went shopping at the Fresh & Easy store on the corner of Main and Chapman in the city of Orange, (You guessed it, the city of Orange is in Orange County. And both are in Southern California.)

Read what Jon found at the store, and his views on his shopping trip and the store and format overall here.

The soon to open Fresh & Easy store on Hollywood Blvd. See the "stars" in the foreground on the "Walk of Fame"?

Tesco will open it's first store-of-the-stars next week, when a Fresh & Easy Neighborhood Market opens at 7021 Hollywood Blvd., on Hollywood's (California) famous "Walk of the Stars."

Hollywood Blvd. is where celebrities of movie, television and other show biz fame have stars on the sidewalk with their names on them. The street also is home to the famous Mann's Chinese Theatre, and to the fairly new Kodak Theatre, where the Academy Awards and EMMY Awards celebrations are held each year.

The Fresh & Easy Hollywood Blvd. store will have its grand opening on Wednesday, January 23. The store, located at Hollywood Blvd. and Sycamore, will have a ribbon-cutting ceremony to kick the grand opening off. Fresh & Easy CEO Tim Mason will be joined by local officials, neighborhood residents and store employees at the ribbon-cutting.

Grand opening events will go on all day. These include food samplings, store tours and entertainment. Fresh & Easy also will donate $1,000 to a local non-profit organization to be named.

Above is the Fresh & Easy store location in a center on Hollywood Blvd. in Hollywood.

The Hollywood Blvd. neighborhood where the new store is located is an interesting one. The area has become increasingly residential over the last five years. It also hosts thousands of tourists daily, especially in the spring and summer. They come to view the "Walk of Stars," tour the theaters, and enjoy the sights. These sights include numerous street vendors and other interesting folks, who all are looking for their shot at stardom.

The neighborhood also has a vibrant nightlife scene. There are numerous restaurants, cafes and nightclubs, that draw people from all over the region.

There currently are few grocery stores in the immediate neighborhood, so the location should be good for Fresh & Easy. It also should provide the retailer with some interesting publicity for it's retail operation: The Hollywood tabloids and blogs love to report on celebrity sightings at the city's supermarkets. It's likely they will add the new Fresh & Easy market to their location list, especially with it being right on Hollywood Blvd.

Monday, January 14, 2008

Deborah Weinswig, a retail industry analyst for investment bank Citigroup Global Markets based in New York, told the grocery industry trade publication Supermarket News in an article for publication tomorrow that Wal-Mart sources have confirmed to her their plans to open a 20,000 square foot grocery market that would be a modified version of the chain's Neighborhood Market format.

The 20,000 square foot stores, named "MarketSide," will have a large assortment of fresh foods, according to Weinswig.

"It's not intended to take on Tesco but just part of a natural evolution for the company," Weinswig told Supermarket News.

Weiswig also said her source at Wal-Mart confirmed the four Arizona locations that were first reported in the Financial Times yesterday, and that we reported here. Those store locations will be in the Arizona cities of Chandler, Mesa, Tempe and Gilbert. (You can get the exact store addresses and other details here.)

While we respect Ms. Weinswig's opinion--and know she's just repeating what she was told from the Wal-Mart source--we believe a little more than "natural evolution" caused Wal-Mart to decide to open the small format, "MarketSide" stores. That something, along with whatever "natural evolution" has taken place, is the mega-retailer's strong desire to not allow Tesco to take food sales market share away from it in the U.S.

Another reason, and a good one, is that Wal-Mart has been stymied in states throughout the U.S. by county and city governments and neighborhood groups (as well as by national groups) in it's ability to get approved and build the number of Supercenters it wants to. This has prevented the retailer from obtaining the amount of food sales' market share it desires in the U.S.

The small format grocery markets will not only allow Wal-Mart to go head-to-head with Tesco's Fresh & Easy stores--along with doing so with other small format grocers in the U.S. like Aldi, with its increasingly popular no frills, price-impact grocery stores--it will also enable the retailer to put food stores in places where it hasn't been able to locate Supercenters do to this intense opposition.

Weinswig also said she believes it's a good idea for Wal-Mart to test the new format in the Phoenix area, "because Arizona has been a very good market for the company over the past couple years."

Wal-Mart confirms it will test a small-format grocery market later this year in Arizona. Our industry sources also provide us with some further insight regarding what Wal-Mart's 20,000 square foot 'MarketSide' stores might be like

Yesterday we reported on the Financial Times' report that Wal-Mart will open four small-format grocery markets in Arizona later this year. (Read that piece here, or see it below.) We also linked to a piece in the blog Natural~Specialty Foods Memo, which ran the FT report and added some of its own new information.

Wal-Mart's approximately 20,000 square foot stores, named "MarketSide," will be located in Arizona cities where Tesco either currently has or will soon have stores.

Today we did two things: First, we contacted Wal-Mart in an attempt to get a confirmation on the Financial Times' report. Second, we talked to a number of our sources, who have been giving us information on this story for awhile now.

First, a Wal-Mart spokesperson did confirm that the retailer will be "trialing and testing" a new format of stores later this year. And that the format "would be smaller than the retailer's current Neighborhood Market grocery stores," which are about 45,000 square feet. However, that's all the spokesperson would say. When asked about the FT story, as well as questions we posed from conversations with our sources, we recieved a polite no comment.

Second, we talked with a number of our sources today. Many of these sources are close to Wal-Mart in one way or another.

Here is what we feel comfortable enough to report, beyond the Financial Times story, thus far:

>We're told the four Arizona "MarketSide" stores are far more than a test, or pilot program. Further, that Wal-Mart plans to challenge Tesco not just in Arizona, but in California as well.

The Wal-Mart team that developed the "MarketSide" grocery store format, did so while being based in the San Francisco Bay Area for a number of months last year. We've been told by more than one commercial real estate source in the Bay Area that Wal-Mart representatives have met with commercial real estate people in the Bay Area--as well as in Southern California--searching for locations for the 20,000 square foot "MarketSide Stores."

>We have been told by a food industry source who has lots of involvement in the prepared foods arena, that Wal-Mart representatives talked extensively to a prepared foods product development consultant he knows, about store-brand prepared foods entree development and related products. He told us the consultant never ended-up doing any work for Wal-Mart, but felt the company was very serious about creating such a line of store brand prepared foods items. The consultant didn't know anything about new format developments until his conversation with out source.

>We talked to an executive for a major, national grocery manufacturing and marketing company in the U.S. This company obviously does business with both Tesco and Wal-Mart internationally. He wouldn't tell us the Wal-Mart executive's name (and we certainly didn't push him to tell us), but said he was recently asked by this executive how Tesco was selling some of it's products at such low prices at its Fresh & Easy stores thus far operating in California, Arizona and Nevada.

The grocery products' executive assured the Wal-Mart executive that Tesco wasn't paying (or getting any kind of rebate) any less than Wal-Mart for the goods. (We have no doubt that's true. In fact, based on Tesco's number of Fresh & Easy stores open in the U.S. and a logistics system that's just in its infancy, the products cost the retailer more in a gross cost manner than they do Wal-Mart.)

Our source further told us the Wal-Mart executive then told him that "When we open our small format markets we can easily under-price them (Fresh & Easy) on your products, and we won't have to lose money on the items like they (Tesco) are doing. (This conversation was sometime before the reports on Wal-Mart's new, samll format stores were made public.)

This source is a straight shooter. This comment to him from the Wal-Mart executive indicates to us--along with a number of other bits of information we have but aren't ready to publish just yet--that Wal-Mart's "MarketSide" stores are going to be similar in format, product selection and merchandising to Tesco's Fresh & Easy Neighborhood Market stores. They might not be

Sunday, January 13, 2008

Tomorrow's edition of the Financial Times is reporting that mega-retailer Wal-Mart will open four small-format grocery markets in the Arizona cities of Mesa, Chandler, Gilbert and Tempe this summer.

All four of the cities where these four new stores will open are south-east of Phoenix. Further, some of the stores will be only a mile from where Tesco has, or soon will have, Fresh & Easy grocery markets. You can bet these four won't be the only small-format stores Wal-Mart opens in the region--or in the U.S.

The new, small-format stores from Wal-Mart will operate under the "MarketSide" banner. The "MarketSide" stores will be about 20,000 square feet, 5,000 to 7,000 square feet bigger than Fresh & Easy stores.

With Wal-Mart entering the small-format grocery arena, we're poised to see a battle between it and Tesco's Fresh & Easy like none that have been seen in decades--and maybe even ever--in U.S. food retailing history.

Friday, January 11, 2008

The newest Fresh & Easy Neighborhood Market store opened yesterday morning at 10 a.m. in the Southern California city of Huntington Beach. It's the first Fresh & Easy in that city.

Huntington Beach mayor Debbie Cook (pictured below with scissors in hand), joined by Fresh & Easy executives and store employees, cut a ribbon before the store's doors officially opened to kick-off the market's grand opening celebration.

Fresh & Easy store associates presented a $1,000 check to representatives of the West County Boys and Girls Club, a local non-profit youth group. The retailer donates $1,000 to a local community organization each time it opens a new store.

According to sources at the grand opening, there were about 100 people--some waiting in line, others arriving shortly after the store opened--who packed the store when it opened.

Huntington Beach is located in Southern California's Orange County, which is a key target region for Fresh & Easy stores. A second store in Huntington Beach is set to open soon. Additionally, a store located in the Orange County city of Fountain Valley is scheduled to be open shortly. These two stores will bring the total number of Fresh & Easy stores in Orange County to date to about six, with many more on the way.

Our sources at the grand opening said shoppers crowded the aisles after the store opened, picking up grocery items and prepared foods. The store offered free samples of its prepared foods as part of the grand opening celebration.

They further told us that many of the shoppers compared the Fresh & Easy to Trader Joe's. Many also commented they liked the fact that, unlike Trader Joe's, the Fresh & Easy grocery market offers basic grocery and non-foods items, both under the Fresh & Easy label, as well as national brands.

Fresh & Easy has submitted plans to locate a new grocery market at the northwest corner of Redlands Blvd. and Mountain View Avenue in the Southern California city of Loma Linda, reports The Sun, a newspaper in San Bernardino County, where Loma Linda is located.

San Bernardino County, in Southern California's Inland Empire region, is a key market for Tesco's planned Fresh & Easy Neighborhood Market empire. In the next two years, Tesco plans to open 18-20 stores in the fast-growing county. The retailer has said it plans on opening about 130-200 stores in California, Arizona and Nevada in the 2008 to 2009 time period. Currently, there are about 30 stores open in the three-state region. The first stores opened just two months ago, in early November, 2007.

If the plans are approved by the Loma Linda planning commission on January 23, and then by the city council after that--which looks likely--the Fresh & Easy store would be the retail anchor for a 26,000 square foot shopping center at the location. The center, which would be built on a 2.6 acre lot that's been vacant for years, would also include other retail stores and a fast food restaurant, according to The Sun.

With it's rapid store development plan, Fresh & Easy has been renovating numerous previous empty retail buildings in Southern California for its 10,000 to 13,000 square foot grocery markets. Additionally, it plans to locate stores in a number of spots, like the Loma Linda location, that are looking to be developed by builders and need a retail anchor tenant.

There appears to be widespread support among members of the city's planning commission and city council (including the city's mayor) for Fresh & Easy to locate a store in the currently vacant site.

If not, a blogger named Jonah over at the la.foodblogging blog just might out you on the blog. It's ok though, no names were mentioned by Jonah.

The la.foodblogging blogger was shopping in the Manhattan Beach Whole Foods' in Southern California when he saw a male customer in the store, with his Fresh & Easy name badge flopping from his belt. That was Jonah's first--and last--clue as to who the shopper was; and where he worked.

Monday, January 7, 2008

Tesco, parent company of Fresh & Easy Neighborhood Market, is back at the retail food store format drawing board, this time creating a new, small format, no frills, deep discount store designed to fend-off competition in Britain from German grocers' Aldi and Lidl's small format, deep-discount grocery markets, which have been growing in numbers and popularity in Britain, and taking market share away from Tesco's supermarkets.

London's Telegraph.co.uk reports today that Tesco, the third-biggest retailer in the world, began last summer converting an old warehouse owned by Jack Farmer, the retailer's founder, into a mock German discount store. The reason: To design a no frills, small format, limted assortment, discount format of its own to counter the Aldi and Lidl threat in the UK.

This is the same process Tesco used to develop its Fresh & Easy, small format grocery market chain in the U.S. The retailer acquired an old warehouse in the U.S., and used it to tinker around with various design and merchandising concepts until it arrived at what is today the Fresh & Easy store format.

In fact, according to our reading of the Telegraph.co.uk story--and some digging around over the phone with sources we did today--it sounds like the new Tesco small format, deep discount store prototype the company is currently working on might be at least one part Fresh & Easy.

That part is the low-price leader, basic grocery aspect of Fresh & Easy stores. Fresh & Easy stores open in the U.S. offer a limited assortment of private label and national brand basic groceries at very low prices--thus far lower overall prices than the supermarkets in the stores' trading areas in Southern California, Arizona and Nevada.

In fact, the format under design might be very similar to Fresh & Easy overall. Aldi and Lidl stores in Britain sell a limited assortment of high-end, specialty and natural/organic groceries and prepared foods in addition to basic groceries. The stores offer these upscale items at a super-low price as well. This is similar to Fresh & Easy stores, which combine the basic grocery concept in the stores with an extensive offering of fresh, prepared foods at reasonable prices, along with a limited selection of specialty, natural and organic groceries priced at a discount.

Aldi has about 900 stores in the U.S. They are small format, no frills stores similar to those the German grocer operates in Europe and elsewhere throughout the world. However, unlike the Tesco Fresh & Easy stores, (and unlike Aldi stores in the UK) Aldi's U.S. grocery markets don't offer much in the way of prepared foods or specialty and natural/organic grocery items. Lidl doesn't currently have any stores in the U.S.

Sidebar News: Tesco isn't waiting for its new, no frills, small discount store format to be finished: This week the retailer will begin to match Aldi's and Lidl's prices on over 2,000 items in its Tesco supermarkets in Britain. The giant retailer also just launched 300 no-frills Lidl and Aldi-style products, with another 200 items on the way. Read more here.

Saturday, January 5, 2008

In an article about Whole Foods Market, Inc., published in tomorrow's (Sunday, January 6) Austin-American Statesman newspaper, Whole Foods' executive vice president for growth and business development Jim Sud shrugged off Tesco's Fresh & Easy Neighborhood Market as a competitor, especially in California, where the British grocer is establishing its primary retail food store presence in the USA.

Asked in the piece (titled: A humbling year for Whole Foods) by reporter Lilly Rockwell about Fresh & Easy as a competitor, with its rapid store development program in California particularly, Sud said: "There is competition everywhere. Our goal is to be the best food retailer in every market we operate. One of the strengths of Whole Foods Market is its ability to innovate and grow and evolve. And, our new stores are a testament to that," he adds.

Our Analysis and View:

We agree about 75% with Sud. Fresh & Easy grocery markets are dramatically different than Whole Foods' food and lifestyle stores. Whole Foods stores are huge and upscale. Fresh & Easy markets are small format and fairly no-frills. Whole Foods' focuses on selling a huge variety of natural and organic groceries, fresh foods and perishables. And although the grocer offers some good promotional deals, price competition isn't a key element of the supernatural retailer's positioning.

On the other hand, Fresh & Easy's focus is on offering a limited selection of private label and national brand basic grocery items, along with an extensive selection of fresh, prepared foods.

Price also is key in the British grocer's positioning. Fresh & Easy offers the private label and national brand basic grocery items at low, everyday retail prices (often lower than supermarkets), and has extremely reasonable prices on its extensive line of fresh, prepared foods.

But, it is in the area of prepared foods where we depart (at least 25% worth) from agreement with Sud. One of Whole Foods' biggest growth areas is in fresh, prepared foods. These in-store prepared items aren't cheap. The quality is high, the taste generally excellent, and all the ingredients are natural or organic.

While we see this area continuing to be a major growth area for Whole Foods, we also believe that in places like California, where Fresh & Easy is building scores of stores, that the grocer will have a competitive effect on Whole Foods' prepared foods sales.

Why? First, food prices (including prepared foods) are rising dramatically in the U.S. Additionally, the outlook for the 2008 economy is poor--high energy prices, loss of jobs, credit crunch, soaring food prices and more. Many economists, and even U.S. government-affiliated agencies, are predicting a 50% chance of a recession in the U.S. this year. And these same experts are predicting inflation if an all out recession is avoided.

Second, although Fresh & Easy's fresh, prepared foods are produced in a central kitchen in Southern California and shipped daily to its stores, they are of high quality, especially based on the retail prices the grocer is currently selling the items for.

They aren't of the quality level, or taste level, of Whole Foods' in-store prepared foods items in our opinion. However, they taste good, use high-quality ingredients, and are clean from an additive and preservative standpoint. Many also are organic. In other words, high quality plus reasonable prices equals excellent value. All shoppers love value, regardless of their income or educational level.

This fact, combined with the rising food prices and cost of living (not to mention possible recession), will drive many consumers to Fresh & Easy stores for some of their prepared foods' purchases we believe. Many of these shoppers will be Whole Foods' customers who will shop Fresh & Easy as a secondary market--with a primary focus on buying the prepared foods items.

Since Tesco is building and plans on opening so many Fresh & Easy stores in California especially, Whole Foods' will see some erosion in its overall prepared foods sales, especially this year, due to the poor economy. This will of course depend on the particular Whole Foods store and neighborhood, and how close a Fresh & Easy grocery market is to that store.

Whole Foods' need not worry much overall about the competitive effect from Fresh & Easy however. It is true what Sud says--the supernatural grocer is an innovator. New concepts like gourmet restaurants, wine bars, mini day spa's--all innovations incorporated in many of the new stores the grocer opened in California and elsewhere last year--will keep Whole Foods fresh and important for shoppers. We are bullish on the chain, and believe it has much growth ahead.

However, not realizing that Fresh & Easy, which will have over 50 stores in Southern California alone by the end of this year, isn't going to exert some competitive pressure on Whole Foods is wrong, in our opinion. And, as we said, this competitive pressure will come primarily in the fresh, prepared foods category.

Although Tesco's Fresh & Easy Neighborhood Market store's format stands on its own in our opinion, it does owe much of its inspiration and marketing strategies to Trader Joe's, the quirky, small format specialty grocer that's engendered an extremely loyal consumer following in the U.S.

A look inside a Trader Joe's market located in Hampton Roads Virginia.

Fresh & Easy stores are part small format, limited assortment discount grocery store and part fresh foods and specialty store. Sort of like low-price leader neighborhood grocery store meets Trader Joe's (TJ's), with a few of its own unique twists of course.

For example, the TJ's part is seen in Fresh & Easy's extensive private label grocery and prepared foods lines, its merchandising of fresh produce in plastic containers, it's Trader Joe's-like fresh meat departments, and a few other key areas like its specialty grocery selection.

The stores themselves have a TJ's look to them, both in size and design. Fresh & Easy stores are, like Trader Joe's stores, utilitarian, yet have a slightly upscale look in terms of graphics and colors. The stores also use warehouse-type shelves, similar to the style used in TJ's stores.

The Fresh & Easy format is set apart from Trader Joe's in that it offers a selection of private label and nationally-branded basic grocery items at discount prices, in addition to its prepared foods and fresh and specialty grocery offerings.

Trader Joe's has established an extremely loyal consumer following in the U.S. In fact, communities and neighborhoods regularly lobby the Southern California-based specialty grocery store chain, which is owned by German retailer ALDI, to locate stores in their cities, towns and neighborhoods.

So loyal to Trader Joe's are some shoppers, like blogger Stacybee who writes for the blog neatorama.com, that they not only write glowingly about the grocer, but even chart the locations of Trader Joe's stores when they take trips, like she recently did, stopping at a number of the stores along the way on her travel route.

She isn't alone in her love of everything Trader Joe's either. Numerous posters comment on her story on the blog. Each one offers his or her reasons why they're hooked on TJ's.

Blogger Staybee recently moved to a part of the country where there is no Trader Joe's near her, and is having serious withdrawal symptoms, she says. So severe in fact, that when a friend of hers recently made a trip to a city where there is a TJ's, Stacybee made her take a huge ice chest with her so she could stop at the Trader Joe's, load it up with things on Staybee's list, and lug it back home for the TJ's lover.

The consumer loyalty that Trader Joe's has--and it is widespread and real--can't be obtained through mere marketing. It is something that's earned through a combination of store format, creativity, product selection, pricing, merchandising savvy (and marketing), and good timing, along with some good luck and a few other factors.

TJ's sets a high bar for Fresh & Easy in terms of garnering that same loyalty from its customer base. This of course takes time, and Fresh & Easy is brand new. But it also takes constant retail creativity and freshness. That ability to surprise shoppers with your stores, product selections, merchandising and pricing.

Trader Joe's has been able to do that, and thus create a national base of super-loyal customers--and even wannabe customers--throughout the USA.

This is the challenge for Fresh & Easy. To differentiate itself as a retail format. To create a culture that is embraced by both employees and consumers. And to create retail surprise and value daily.

With a popular competitor like Trader Joe's, which is loved by so many, Fresh & Easy has a high bar to reach. However, if the British grocer can reach that bar, its success in the U.S. will be fabulous.

Friday, January 4, 2008

The newest Fresh & Easy Neighborhood Market store will open on Wednesday, January 9 in the Orange County city of Huntington Beach.

Tesco will open its newest Fresh & Easy grocery market next Wednesday in Huntington Beach, in Southern California's Orange County.

The store, located at 16672 Beach Blvd., will open at 10 a.m. Wednesday morning. There will be grand opening festivities, including free food and beverage samples, contests and other surprises, according to Tesco. Wednesday begins the kick-off of a five-day grand opening promotion at the store.

The grocery market is about 13,000 square feet. It's located in a fairly upscale neighborhood in Huntington Beach, which like numerous other cities in Orange County is fast-growing.

The Huntington Beach Fresh & Easy will be store number 29 for Tesco. The first Fresh & Easy stores opened just two months ago in Southern California. The retailer currently has stores in the Orange County cities of Anaheim, Buena Park, Orange and Lake Forest.

Orange County is a major market for the Fresh & Easy markets. The retailer has plans to build as many as 20 stores in the region this year. In addition to Southern California, Tesco currently has stores in Arizona, and in the Las Vegas Nevada metropolitan area.

Tesco says it will present a donation of $1,000 to the West (Orange) County YMCA as part of its grand opening festivities on January 9. The retailer has a policy of donating that amount to a local non-profit group in the store's local area each time it opens a new store.

Fresh & Easy Neighborhood Market stores are a hybrid basic grocery store and fresh, prepared foods retailer. The stores offer a limited selection of Fresh & Easy brand private label groceries and perishables, along with national brands. The focus on the basic grocery items is to be the low-price leader in the neighborhood.

The grocery markets also carry an extensive selection of fresh, prepared foods. These ready-to-eat, ready-to-heat and grab-and-go items range from basic offerings like mac n' cheese and meatloaf, to more upscale prepared foods like mixed greens in balsamic dressing, beef tips in burgundy sauce, and Thai, Japanese and other ethnic foods offerings.

The stores also merchandise fresh produce and fresh meats. Fresh & Easy also sells a selection of natural, organic and specialty grocery products in the stores.

The small format markets average about 10,000 to 13,000 square feet. They're designed to serve as primary shopping destinations for consumers, while at the same time providing faster, more convenient shopping than a traditional supermarket or superstore.

Last month, British-based retailer Tesco opened its 100th supermarket in Ireland. This achievement is significant for a couple of reasons.

First, The British grocer only entered Ireland in 1997, a mere decade ago. Second, in that ten year period Tesco, parent company of Fresh &Easy Neighborhood Market in the USA, has become the number one food retailer on the Emerald Island.

In an article in today's IrishExaminer.com, the publication's consumer correspondent Paul Kelly charts Tesco's road to success in Ireland. In the piece, Kelly talks about how the retailer has not only challenged the food retailing market in Ireland, but also has taken on retailers of many formats by selling electronics, clothes and other goods in its stores. This is a practice Tesco is well known for doing internationally.

The current success for Tesco in Ireland is all the more important for the retailer since it tried to crack the Irish market once before, and failed.

This time around Tesco, which is opening a new supermarket in Ireland every five months, is not only succeeding, but also is becoming a major service business player by offering Irish consumers everything from mobile phone plans and insurance, to personal loans and credit cards, in its supermarkets, along with fresh meats, groceries and other food and non-food products.

Tesco's Ireland example could portend the retailer's success in the Western U.S. with its Fresh & Easy Neighborhood Market stores. Although the Fresh & Easy markets are smaller, the grocer has plans to have as many as 200 of the stores operating in the Western USA by the end of this year or early 2009.

Tesco also is looking at putting Fresh & Easy stores in Chicago, New York and Florida, perhaps beginning as early as late 2008 or early 2009. The retailer's strategy is to create a critical mass of stores, similar to what Walgreens has done with drug stores and what Starbucks does with coffee shops.

Thus far the main focus of this "critical mass" strategy is Southern California. Tesco is currently opening stores using a strategic plan that essentially will ring the Southern California region with stores in the next two years.

The grocer is following this same plan to a slightly lessor degree in the Phoenix metro region in Arizona and in Las Vegas, Nevada. Additionally, Tesco is currently locking up real estate for Fresh & Easy store locations in Northern California, where it plans to follow this same strategy, opening as many as 30-50 stores in the next couple years.

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